In defense of centrists

U.S. Capitol is seen shortly after beginning of the Government shutdown in Washington.

In a recent New York Times column, Paul Krugman rightly charges Republicans with hypocrisy for espousing fiscal responsibility while adding trillions to the national debt, but adds “my anger isn’t mostly directed at Republicans; it’s directed at their enablers, professional centrists…” I rise to the defense of the centrists.

I consider myself a moderate Democrat, not a centrist. I was proud to serve in two Democratic administrations (Johnson and Clinton), but I don’t think either party has all the right answers, especially on economic policy. Indeed, I believe the polarization of the electorate into warring red and blue tribes makes bipartisan negotiation leading to a centrist economic agenda more, rather than less necessary.

In this divided country, if the two parties do not work together to find common ground, we are doomed either to gridlock or wild swings in policy—and we will never address the hard challenges of climate change and rising debt, which demand bipartisan consensus to share the pain as well as the benefits. Moreover, I believe that sensible, fiscally responsible policies exist that moderates in both parties would buy into, if only they could break out of their tribal compounds and work with each other. Sadly, party leadership and congressional rules increasingly thwart bipartisan negotiation.

I am certainly not urging compromise on racial injustice or xenophobia. Nor am I talking about issues that stir deep religious and cultural passions and seem to defy rational argument, such as gun rights, abortion, and transgender bathrooms. But neither is Krugman. We are both economists focused on economic policy.

There are two reasons for creating economic policy through bipartisan negotiation. The first is that households and businesses need relatively stable policies that allow them to plan future actions. Frequent big swings in tax laws or public provision of retirement or health care benefits, for example, add to uncertainty and impede decision-making.  Since the electorate is roughly equally divided between Republicans and Democrats and tends to swing back and forth as hopes for one-party miracles are replaced with disillusionment, stable economic policy requires bipartisan buy-in.

In this divided country, if the two parties do not work together to find common ground, we are doomed either to gridlock or wild swings in policy.

We have seen the costs of partisan warfare over economic policy mount in the last decade. The two parties have battled almost continuously over the budget, often using continuing resolutions to fund federal activities for a few weeks (or even days) at a time; shutting down the government in hopes the public will blame the other party for this senseless act, and even threatening to default on the national debt to gain partisan advantage. Such dysfunctional governing is costly for both the government and the private sector and undermines confidence in American democracy at home and abroad.

We have also seen the enormous downsides of passing major economic legislation with the votes of only one party. Let’s try a thought experiment. Suppose the Affordable Care Act (ACA) had been the product of a good-faith negotiation between Democrats and Republicans aimed at producing a bill that moderates in both parties could support. Moderate Republicans could have supported income related federal subsidies for households purchasing health insurance in electronic markets, but might have insisted on penalties for non-enrollment, rather than a mandate, a less generous benefit package, additional flexibility for states to adapt the program to their particular conditions, or less reliance on expanding Medicaid. Right wing Republicans would still have opposed any expansion of federal subsidies for health care, and left-wing Democrats who favor single payer might have dropped out as well. But a centrist compromise with the support of moderates in both parties could have provided broader, more stable increases in health insurance coverage than the ACA. Bipartisan buy-in would have allowed the parties to fix glitches in the law as experience revealed them and kept Republicans from demonizing Obamacare, misrepresenting its faults, preventing its improvement, and sabotaging its implementation.

Similarly, a genuinely bipartisan tax reform negotiation could have produced far more stable, pro-growth tax policy than the recent Republicans-only tax bill without ballooning future deficits. Many Democrats supported corporate rate cuts accompanied by broadening the corporate tax base to reduce revenue loss and would have supported many of the Republican cuts in individual taxes if the total package had been less egregiously tilted toward the very rich. However, since Democrats were not allowed in the drafting room and none of them voted for the bill, they are now demonizing it, much as Republicans did Obamacare, and exaggerating its faults. Democrats are alleging middle-class taxpayers will not benefit, although they actually will, if the cuts for them are extended beyond 2025, which seems likely. Unfortunately, the one-party action not only adds trillions to the debt, but continuing partisan rancor fosters uncertainty about future tax policy, which makes planning harder for households and businesses alike.

The other reason why major economic policy requires bipartisanship is that meeting the big challenges facing our economy, such as reining in the projected increase in national debt, requires sharing the pain as well as the gain. Austerity is bad economic policy in a recession; so is adding massively to deficits at full employment and continuously growing the debt faster than the economy. Current policies will likely produce higher interest rates that restrain private investment, rising debt service costs that drive out public investment, and growing risk that our creditors will lose confidence in us.  Restoring fiscal responsibility requires reducing the growth of entitlement spending or increasing the growth of tax revenues or both, and neither will happen until both Republicans and Democrats are willing to take ownership of a bipartisan plan.

Other looming challenges, such as shifting from fossil fuels to renewable energy to mitigate climate change, also involve near-term pain, such as dislocation in the oil and coal industries. Without bipartisan ownership of both the pain and the gain, these necessary adjustments will be politically impossible.

We have seen the costs of partisan warfare over economic policy mount in the last decade.

Both conservative Republicans and liberal Democrats regard moderates who espouse bipartisan negotiation as wishy-washy opportunists willing to compromise their principles. But debates about economic policy generally do not involve absolute “principles.” They involve balancing competing preferences along a continuum of values, such as compassion v. personal responsibility. In general, Republicans favor smaller government with more limited powers, at least in domestic affairs, and more reliance on markets; Democrats favor a more activist government assuming greater responsibility for protecting the less fortunate and mitigating the risks of unregulated markets. Policy-making is normally about shifting the balance a little one way or the other. Moreover, the range of practical policy alternatives for the role of government is quite narrow in contemporary America. Neither communists, nor socialists, nor advocates of unfettered capitalism have significant political support—despite the stereotypes that each party hurls at the other in campaigns.

The recent two-year budget agreement illustrated that moderates in both parties could work together if their leadership would let them. The politicians recognized that the public was disgusted with partisan warfare and dysfunctional budgeting, and that there was broad public support for most current federal activities, as well as for sustaining popular safety net programs, such as the Children’s Health Program and Community Health Centers, and for strengthening military capability.  Debt worriers, including me, pointed out that the agreement added substantially to the debt, but a two-year agreement on appropriations was not the place to deal with the long-run upward trajectory of debt. The longer-run fiscal conversation must include entitlements and taxes.

Partisan Democrats criticize advocates of bipartisan economic policy for not aggressively calling out Republicans for causing the current breakdown in cross-party cooperation and civility. They are right that the confrontational actions of right wing Republicans bear most of the responsibility for recent debacles and that President Trump has brought partisan warfare to a new level of ugliness. But the escalation of partisan rivalry into tribal warfare was building long before Trump or even the Tea Party. Democrats are not entirely blameless.

The crucial point, however, is tactical. Neither party can hope to start a productive negotiation by marching into the room shouting, “It’s all your fault, so now let’s talk about a bipartisan deal.” Hope for bipartisan policy on the economy or any other topic depends on stopping the blame game, beginning to listen to each other, and rebuilding trust before working together to solve the problems that beset us.